Grading the Boss

It's great armchair sport, grading the president's first 200 days or 300 days—or in the case of President Obama his first major political gamble, health care reform. Grades land all over the board depending on one's ideology or access to facts. Although objective observation generates the most accurate grades. All this got me to wondering how small business leaders could objectively observe and grade ourselves—our pluses, our developmental needs. It's important to know those grades.


When is the last time you evaluated your own performance? How did it look? What did you do about it? It sure ain't easy to get good evaluations. We beat up on ourselves too much or ignore faults altogether because that's less painful. Denial and rationalization can rush in when we turn inward.

Here's a quick primer on self-evaluation. I found many angles on this when I was Head Coach (aka, CEO) of Tires Plus, the 150-store retail chain I cofounded and sold to Bridgestone. I did an annual performance review of myself and added that to feedback from people who reported to me, submitted anonymously to our HR director. 

I still chuckle about the reaction this got from people a few years ago at the American Management Association's CEO Conference in Quebec. When I mentioned feedback I got from an employee review other CEO's were appalled that I had allowed my employees to talk about me like that. Ignorance is not bliss, I told them. I'd rather know what employees are thinking and saying and make corrections based on valid criticism. That's how you avoid the Emperor-has-no-clothes syndrome.

Another evaluation tool I've always used is coaching myself on the run. "Nice job, Tom, on your helpful interaction with and advice to Charles," I'd say to myself. Or: ‘‘Uh-oh, Tom. You got defensive again when John gave you feedback." It's healthy to talk yourself via objective self-observation.

You can also fix on how you're doing by candidly asking people around you, "What do you like about what I'm doing? How can I improve?" Sure, at first they'll hesitate to tell "the boss" what she's doing wrong. But if you lead with the pluses, and keep repeating, you’ll pan some gold.

Indeed, it's fine to grade presidents and employees but not to the exclusion of grading yourself. No one knows you better.

Crazy CEO Pay Kills the Goose that Lays the Golden Egg

Now we have a "Compensation Czar."

Yesterday President Obama named Washington attorney Kenneth Feinberg "special master for compensation." How did we get to a point where the federal czar pool included somebody who has to watch Corporate America's cookie jar?

Amid the chatter about poorly rated subprime mortgage bonds, financial weapons of mass destruction and loony corporate and consumer leverage, CEO and senior management pay hasn't come in for an appropriate amount of blame for our Great Recession.

It’s sad that it has come to this. But maybe it’s the lesser of two evils. I'm hardly playing fast and loose with the word crazy to characterize the recent history of CEO pay. The ratio of CEO pay (salary, bonus, stock grants) to average worker pay was 24-to-1 in 1965, according to a 2005 Wall Street Journal report. In 2005, it had reached 262-to-1. (My pay was 8-to-1 when I was CEO of a $200 million per year retailer.)

You may ask, So what if these ratios are stratospheric? (You may also ask why I didn't pay myself more, a subject for a later post.) Companies have various stakeholders: CEO and senior management, line employees, customers, shareholders, the community in which they operate. If the CEO and senior management take a large stake, it has to shrink the stakes of the other stakeholders.

It's hard to take the stakes away from the customer since management competes every day with its rivals on price and quality. That leaves employees, shareholders and the community getting shafted. Employees, especially the lowest paid, are the most vulnerable. Before the crash, CEO’s engineered huge pay increases as they vigorously fought increases in the minimum-wage that hadn't budged for a decade (see Barbara Ehrenreich's "Nickel and Dimed"). The irony that must be lost on CEO's and boards is that the declining real wages eviscerate their customer base.

Golden Goose, meet Death.

Meantime, the official memo from the corner office says that capitalism is so darn fair. Indeed, capitalism is fair ... unless the egos and greed of CEO’s and senior management go unchecked. Then we have feudalism masked as capitalism; serfs working for overlords.

Shareholders feel the sting as well. For those who have made enough lately to pay expenses and taxes AND make investments, crazy executive pay has hurt their 401(k)'s and mutual funds. Anyone who invested in an index fund tied to, say, the S&P 500, has lost 27 percent over the last ten years.

Massive bonuses and stock grants without claw-backs encouraged reckless investing that led to 2008's crash.

Finally, communities lose when executive pay eats into the share of profits that they often earn from their “pillars of the community.”

The good news? Thanks in part to Warren Buffet's crusade more and more boards feel shareholder and community pressure to make sure that CEO’s and senior management don’t win at the expense of everyone else. One day, maybe CEO's will learn that, as my dad always used to say, pigs get fat and hogs get slaughtered.

[NEXT BLOG: How to terminate in an age of downsizing.]

Cut Costs (Not Your Own Throat)

Cost cutting is as common as spring showers when the economy goes south or your company starts missing plan. It's smart to get out in front—aggressively—in tight times. That said, you gotta know what to cut and what leave alone. What to cut?

Absolute waste. It's stuff like note paper and things like extra, unused phone minutes. Ask employees for their cost-cutting ideas. They know where the waste is buried better than you do.

Overly expensive purchases. Try to get three bids on practically everything you buy, especially large expenses—and even on small, ongoing expenses.

Employees. Grade your employees' performance and potential on a scale from A to F. Then book a candid talk with whomever you graded below a B, or with whomever isn't trending in that direction. Sensitively and firmly free up their futures. Consider salting their duties into other positions before opening the positions to hire.

The P&L statement. Go down your expenses line by line for other ideas. Utilities? Can you crank down the thermostat 5 degrees for savings?

But beware of cutting into bone. By that I mean, triple-check that cuts don't accidentally lower revenue or simply shift costs. Seriously ponder before cutting the following.

Marketing. The advertising and P.R. expense lines are favorite whipping boys when business is hurting. The problem is that down times are when you need your name out there more than ever. Otherwise revenue will fall further. Certainly, stay within industry guidelines (generally 4 to 5 percent of sales) and measure which efforts are effective (the web makes this easier than ever). Hard times also open up opportunities to negotiate harder since you have leverage over desperate media outlets.

Education. This is the lifeblood of your company, essentially no different from R&D. Less of this means more ineffective and uninspired employees. Do. Not. Cut.

Technology. Yep, hold these expenses to a specific ROI but be very careful with cuts. Reductions here generally mean you'll wind up needing more humans doing what the technology would've done. Further, you'll lose valuable reporting tools, essential for strategic thinking.

Bottom line: Cut, yes. But cut with care and understanding. That will help profits and get you pointed north again.